Manage your investment property right
1:40

A cheaper, better mortgage is one of the first things landlords can do to save moneySource: News Limited

CUTTING costs doesn’t have to mean worse service or lower standards, we found five ways Australian landlords can cut costs, make a bigger profit and not upset the tenants.

1. FINANCE AND CASH FLOW

A cheaper, better mortgage is one of the first things landlords can do to save money, according to Portfolio Management Services managing director Jock Bing. Not only are there many competitive loans available, including fixed rate loans, but there are also lenders who specialise in investment loans targeted at landlords, he says.

“Interest only loans, even just for a short period, can help with cash flow,’’ Bing says, “while offset accounts, fee-free banking and discounted transaction accounts can reduce costs for regular payments and deposits,” he says.

Metropole Property director Michael Yardney says the beginning of a new tax year is also the time to make sure you have a system, even if it’s a shoebox, to keep track of all expenses and avoid potential refunds being lost because of poor record keeping.

Rate My Agent director Mark Armstrong says a depreciation report can save thousands of dollars each year without any impact on either landlord or tenant.

“One of the big ways to save, that a lot of people forget or don’t know about, is a depreciation schedule,’’ Armstrong says. “They only cost about two or three hundred dollars but even in an old existing property you’d be surprised at how many ways it can provide tax deductions.

“It’s a really low risk proposition for any landlord, a depreciation report can often identify ongoing depreciation of $5000 to $10,000 a year, which at a 40 per cent tax rate is a great way of getting money back,’’ Armstrong says.

3. REPAIRS AND RENOVATIONS

One of the areas inexperienced landlords often get caught out on, is not spending enough -- “the moral is prevention rather than cure” buyers advocate and investor Catherine Cashmore says.

Good maintenance management is vital, Cashmore says, especially to avoid penalties and tribunal cases which can be very expensive and time consuming.

“The worse scenario for a landlord is unexpected or unanticipated periods of vacancy, therefore keeping a reliable long term tenant is preferably to creating a situation which will lead to leases being broken or tenants seeking better options,’’ she says.

Unsatisfactory or even unsafe living conditions are a risk to tenants and landlords, making sure a property is safe, secure and comfortable at all times, will always be cheaper in the long run, she says.

Rate My Agent’s Mark Armstrong also says money spent on upgrades or repairs can offer very high returns.

“If you spend $5000 on a new heating and cooling system, that’s not only a huge benefit to the tenant and added value to the property but it also means you can earn an extra $20 a week in rental income, which is about a 20 per cent return on your cost — now that’s a great investment,’’ Armstrong says.

4. MANAGEMENT

There are only two options with management costs, a professional manager or do-it-yourself. According to our experts, the professional managers do a better job, however, that comes at a price.

“Negotiate your management fees, like all services, property management fees are negotiable and many agents are open to negotiating these fees to secure the contract, First Financial principle Chris Crough says.

However, if you do manage the property yourself, make sure you are up to date with state legislation and legal rights, he says.

“Be careful to pick your tenant wisely and have an open and professional relationship with your tenant,’’ Crough says.

“Don’t skimp by employing a cheap property manager — it may cost you more in the long run,” according to Metropole’s Michael Yardney.

“You should only choose a property manager on their ability to find, approve and keep quality well-referenced tenants for the long term, not because their fees appear cheap,’’ Yardney says.

5. SUPERANNUATION

Superannuation might seem like an unlikely way to save money on an investment property but this type of ownership structure can double the end profit for some investors, Portfolio’s Jock Bing says.

“Buying a property within a superannuation fund may not offer any immediate cost savings but it does mean eventually, when you sell and after the super fund has switched over to pension mode, you won’t have to pay any capital gains tax.

A NOTE ABOUT RELEVANT ADVERTISING: We collect information about the content (including ads) you use across this site and use it to make both advertising and content more relevant to you on our network and other sites.